Cross border insolvencies and financial restructurings are remarkably opaque considering we live in the Information Age. The mission of the Centre of Main Interest (the COMI) is to light some candles in the darkness and create a forum for further discussion. The Law Offices of Tally M. Wiener, Esq. are pleased to publish the COMI blog.
We welcome comments via posts to this site. Please send inquiries via email to tally.wiener@thecomi.com.

Counter

Tuesday, November 5, 2013

Bitcoin Firm Files for Bankruptcy

Per The Wall Street Journal:

By

ROBIN SIDEL and

KATY STECH

Nov. 4, 2013 7:04 p.m. ET

A three-month-old company with ties to one of the biggest promoters of the virtual currency bitcoin has filed for bankruptcy protection with less than $50,000 in assets.

Alydian Inc., a unit of CoinLab Inc., on Friday filed for Chapter 11 protection in U.S. bankruptcy court in Seattle. The 10-page court filing didn't disclose why Alydian filed for bankruptcy or how it hopes to repay its debts.

CoinLab is a bitcoin start-up run by Peter Vessenes, who is also chairman of the Bitcoin Foundation. The foundation is essentially a nonprofit trade group that has gained attention in recent months for promoting bitcoin and supporting new rules aimed at making it more accepted.

CoinLab is one of the best-known names in the fledgling virtual-currency industry, describing itself as a "bitcoin business incubator." It has won credibility because it has attracted funding from venture capitalists such as Silicon Valley's Draper Associates, which pumped $500,000 into the company last year.

Mr. Vessenes, who signed the bankruptcy petition, couldn't be reached for comment. Alydian's bankruptcy attorney also couldn't be reached. A spokeswoman for the Bitcoin Foundation declined to comment.

CoinLab announced the formation of Alydian in August, touting it as "its newest portfolio company" that would develop bitcoin-mining solutions for customers. "Mining" is the term used to describe the computer-generated creation of the virtual currency. The filing doesn't include Coinlab.

Unlike dollars or euros that are backed by a central bank, bitcoin users trade the currency on a number of exchanges or swap it privately. Some merchants also accept bitcoin as payment for goods and services.

Bitcoin trading has been on a rollercoaster this year. The currency nearly quintupled earlier this year, leaping from roughly $50 in mid-March to $230 in April. It traded at about $100 in August, but was fetching $237.50 in Monday trading on the Tokyo-based Mt.Gox exchange.

Federal and state regulators have been cracking down on bitcoin transactions and pushing companies to follow comprehensive anti-money-laundering requirements just like traditional money-transmission businesses such as Western Union Co.

CoinLab, which is based in Bainbridge Island, Wash., has registered as a money-services business with the Financial Crimes Enforcement Network, a unit of the Treasury Department.

Alydian said in court papers that it owes $600,000 to CoinLab Inc. It also listed $3 million in debt to New Zealand's XRay Holdings LLC and $40,000 in debt to Mr. Vessenes.

The filing was made in the name of Alydian affiliate CLI Holdings Inc.